And I have given Steve Jobs credit for just that. It was his genius to create this following of faithful.
I started noticing the odd phenomenon way back in the days of the funny-looking Mac with the tiny little integral screen. And the phenomenon came back strong after Jobs returned to Apple, and they got into the handheld craze.
*Everyone* is vulnerable in a fast moving market. Winners have to put together teams and execute across all disciplines:
Supply and distribution management,
That's a good point, Chanj.
But then, when exactly is the "shrinking of profit margin" going to start?
What triggers it?
If Apple continues to be the only company offering iPhones, that may not happen...
Mobile market is relatively new. Smartphone, despite being around for more than 3 years, is still considered to be a new product, early in the product life cycle. The market will become mature overtime. The shrinking of profit margin is inevitable whether Steve Jobs was still alive or not. Apple no doubt runs a successful business. They please both investors and consumers. The market is going to change. The winner is not necessarily be the best even though I do hope so.
How long can Apple keep charging a profit margin 5X of Samsung when they have to depend on Samsung Foundry to get their A5, A6 processors made ? Other Foundries ( you know who ) have not been able to match Samsung.
In Smartphones Samsung has almost caught up with Apple and Apple has tried to block them with lawsuits.
Samsung has also shown actual working prototypes of hardware that will double the speed of playing games / streaming videos on Smartphones while using only half the battery power.
Is Apple vulnerable ?
In basic product management, you learn that there are two ways to set pricing: cost-based and demand-based. In cost-based, you're essentially trying to get by with the minimum margin that will lead to a sustainable business in your competitive environment. Demand-based means that you charge what ever people are willing to pay. If they're willing to pay a lot more than you cost-based, then you make a lot of money.
Good, bad or indifferent, Apple seems to have nailed the demand-based formula. Enough people like them and their products enough pay what Apple charges and to raise volumes enough to drop Apple's costs.
As stunning as Apple's profits are, imagine how much larger they would be if they could get the fence-sitters to jump to the 4s rather than waiting for the iPhone 5.
I continue to run into people who are eligible for a subsidized upgrade, but foolishly believe the rumors out there about an iPhone 5 "coming soon". Apple's secrecy about its roadmap might actually be hurting sales in this case.
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